Were you aware that there was a Scandinavian bank meltdown in 1992? Kind of passed me by, which is perhaps unsurprising considering I was 11 and living in Madagascar at the time. Whether anyone else was watching or not, the Swedish mortgage market crashed, causing a banking crisis. The government handled it very successfully. They had to bail out seven major banks, at a cost of billions of dollars, but they have made almost all of that back, meaning the tax payer didn’t end up poorer in the long run.
How? Where the US is planning to just take over the bad debts, the Swedes took stock. It was unpopular with the banks and their shareholders, but because the government had the equity, once the banks were stable they were able to refloat them onto the stock market and recoup their losses. The shareholders paid for it, rather than the taxpayer. There’s a good article about it in the New York Times, or see this Swedish news service here for their own perspective.
The Swedish experience proves that a banking meltdown can be handled successfully, and be paid for by the people who created the problem. If Bush says his plan is the only way, either he isn’t paying attention, or he would rather protect the rich. It could be done differently, more fairly, and apparently the Swedes sent a delegation to Washington to explain what they did, since the crisis is remarkably similar in its origins. Washington doesn’t appear to be listening. As Joseph Stiglitz writes today, there is “strong opposition to making the financial industry pay for any losses”.
The Earthbound Report 